Clash of the megas: Atlantis vs. Baha Mar

NEW PROVIDENCE ISLAND, Bahamas -- This tiny island, less than 80 square miles and slightly smaller than Boston, seems too miniscule to contain all the breathless hyperbole that's been spilling out of its two largest resorts of late.

Howard Karawan, president of the long-established Atlantis Paradise Island, countered, "I don't know if there's another resort in the world that has the magnitude and complexity and the bells and whistles that we do."

Less than four months after the long-delayed Baha Mar partially opened its first phase and fewer than four months before the region's peak season, this most populous of Bahamas islands, home of the capital city, Nassau, continues to boost its record-high room inventory.

The most prominent and controversial is Baha Mar, which at an estimated $4.2 billion in construction costs will be the most expensive development in the country's 44-year history.

Baha Mar was delayed for more than two years amid speed bumps that ranged from allegations of financial mismanagement by its original developer to government impropriety to contractor sabotage. Parts of the mega-resort opened in late April, including some 300 rooms at its Grand Hyatt, a 100,000-square-foot casino (the country's largest), an 18-hole Jack Nicklaus-designed golf course, a 30,000-square-foot Espa-branded spa and a handful of food and beverage outlets.

As of late last month, the resort, which during its soft opening was also putting the finishing touches on a high-end retail arcade that included brands such as Rolex, Bulgari and Tiffany, had opened about 1,000 rooms at the Grand Hyatt as well as 18 food and beverage outlets.

About eight miles east, the 3,400-room Atlantis Paradise Island is fighting to maintain its share of the island's visitors between this year and next amid the addition of Baha Mar's 2,300 rooms. An aerial photo of Atlantis Paradise Island, which is getting about $90 million worth of upgrades in 2017. Photo Credit: David WJ Lee

This year, Atlantis owner Brookfield Asset Management will sink as much as $90 million into the 206-acre property. Last month, Atlantis started opening the first of its renovated rooms in the 693-room Coral Towers, and it is adding family-friendly amenities such as a soda fountain in the lobby and a swim-up Popsicle bar. Next month, Karawan said, Atlantis will begin improvements to its Marina Village collection of shops and restaurants adjacent to Atlantis Marina.

Not to be outdone, both Melia Nassau Beach and One&Only Ocean Club, which are located adjacent to Baha Mar and Atlantis, respectively, are touting their own recent improvements. The 694-room Melia Nassau Beach, reflagged from the former Sheraton Nassau Beach in 2013, has received $19 million in improvements since reopening in 2014. The all-inclusive resort was slated to be part of Baha Mar under its original developer, Sarkis Izmirlian, and may eventually be marketed as part of the megaresort, though no timetable has been set.

Meanwhile, the 105-room One&Only Ocean Club, which, along with Atlantis was acquired by Brookfield Asset Management from Atlantis developer Kerzner International in 2012, completed a multimillion-dollar renovation in late 2015, upgrading its Hartford Wing and adding a 125-foot oceanfront pool in the process.

Countering a spring break reputation

Resort owners and Bahamas officials alike are hoping that such improvements and new inventory will help the island shed its reputation as a party destination and cruise ship stop to place it alongside higher-end Caribbean destinations such as the British Virgin Islands and Turks and Caicos.

Jeffery DalPoggetto, a Larkspur, Calif.-based independent affiliate agent of Andavo Travel, said, "Some of my clients' mindset has been closed off because of the college spring-break parties and obnoxious drinking, and it's my job to explain that you're going to find those four-, five- and six-star places in the Bahamas [that don't cater to the party crowd]."

DalPoggetto said he booked one set of clients at Atlantis and another at One&Only in the past six months, and "both ended up loving what they did."

Early signs point to the Bahamas more than holding its own in a region of the Caribbean where demand was hampered last year by fears of the Zika virus.

Upgrades in 2015 at the One&Only Ocean Club included updates to its Hartford Wing.

Caribbean resort demand had steadily surged since the recession, with regional revenue per available room (RevPAR) rising 28% between 2011 and 2015, according to STR. Last year, though, Caribbean RevPAR fell almost 3% and was little changed through June, said STR, which does not disclose Bahamas-specific figures.

Meanwhile, New Providence last year attracted 3.6 million foreign visitors (about 70% by cruise, the rest by air), up about 10% from 2015, according to the Bahamas Ministry of Tourism. Visits during the first quarter of this year, before Baha Mar opened, were up 7.2% from a year earlier, to about 992,000.

With the addition of Baha Mar's rooms and casino, other Caribbean destinations could feel the impact even as Zika fears subside, according to Scott Smith, managing director at consultant CBRE Hotels. While destinations like Grand Cayman and Turks and Caicos might not be affected, Baha Mar could lure some business away from resorts in Puerto Rico, the Dominican Republic, Jamaica and even the Miami area, Smith said.

"They have a nice casino, a good food and beverage program and a great beach," Smith said of Baha Mar. "The hipper, honeymooning type from New York, New Jersey or Miami may say, 'Let's go down to Baha Mar for the weekend.'"

"The buzz is there, so in the short and medium term, it'll have an impact on visitation numbers to the Bahamas, Caribbean and Florida," added STR senior vice president Jan Freitag. "Will they be able to convert those people to repeat customers? I'd rather not speculate."

The Colonnade pool at Atlantis.

A history of pain and controversy

Of course, all the improvements and increased room supply in the Bahamas haven't been realized without pain and controversy.

In 2012, Brookfield Asset Management gained control of Atlantis from Kerzner International, which had opened the property in 1994, in a debt restructuring after Kerzner struggled to repay more than $2 billion in loans in the wake of the recession.

Two years later, Brookfield replaced Kerzner as the property's manager, and Atlantis joined Marriott International's Autograph Collection of independently run properties, gaining a $100 million commitment for a mezzanine loan from Marriott in the process.

Baha Mar's history has been even more troubled. Conceived by Izmirlian more than a decade ago, the development broke ground in Nassau's Cable Beach area in 2011 and had originally earmarked a late 2014 opening. It missed that deadline as well as a handful of subsequent deadlines amid conflicts between Izmirlian, his China-based primary lender and his China-based primary contractor.

Finally, Izmirlian filed for bankruptcy in June 2015 and laid off about 2,000 workers that October.

By late last year, Hong Kong-based conglomerate Chow Tai Fook Enterprises (CTFE) announced that it was taking over the project and tapped Davis, a former Rosewood executive, as Baha Mar's president. CTFE, which has been financing the resort's opening operations, was still in the process of acquiring both Baha Mar and the Melia Nassau Beach as of last month.

The Baha Mar Resort, which officially opened in May.

Politics and suspicions

Baha Mar's soft opening in April generated suspicion among many Bahamians, and an opening-day press conference involving both Davis and local reporters at times bordered on combative. Many believed at the time that the impeding election involving then-prime minister and longtime Baha Mar champion Perry Christie weighed heavily on the decision to open the unfinished resort to select guests.

Baha Mar started taking reservations from the public in May, but Christie lost that month's election to Dr. Hubert Minnis.

As of last month, Izmirlian's BMD Holdings was still calling for investigations into Baha Mar's pending ownership transfer to CTFE as well as its casino license while accusing the Bahamas government of providing too many tax perks to Baha Mar's China-controlled lender.

Against that backdrop, Baha Mar and Atlantis have each deployed marketing strategies that attempt to differentiate one from the other.

Baha Mar continues to position itself squarely in the luxury category, hinting at a more refined experience than Atlantis' largely family-friendly offerings. Baha Mar's officials also said the resort's occupancy as of last month was "above our expectations," though they declined to offer specifics. Davis predicted last month that the resort would eventually employ about 7,500 people, about equal to Atlantis' employee base (New Providence has about 250,000 residents).

"We are growing the island's available room inventory in the luxury category by 40%, elevating the Bahamian vacation experience travelers have come to expect from the islands," Davis said in a statement.

Atlantis, which Karawan estimates attracts about 800,000 annual overnight visitors, is playing up its Bahamas pedigree. This February, the resort added a weekly feature called the Junkanoo Experience in the lobby of its 1,201-room Royal Towers in a nod to the massive, costumed street parade of that name that traditionally takes place in the Bahamas on Boxing Day, Dec. 26. Atlantis' Marina Village will also add a restaurant specializing in fish fry, a Bahamas specialty.

In the meantime, Atlantis' marketing effort seeks to paint Baha Mar as a getaway for Asian tourists.

"You walk into a very pretty casino that dominates the indoor experience," Karawan said of Baha Mar last month. "They've stated that their strategy is to attract a high-end Asian clientele, and clearly their design supports that."

He further asserted that Baha Mar's opening "hasn't impacted our business at all."

The Melia Nassau Beach, a former Sheraton, received a $19 million upgrade in 2013.

A wide range of rates

So far, Baha Mar's reviews have been mostly positive. Like Atlantis, it last month held an average TripAdvisor rating of four (out of five) dots across its 109 reviews (compared with more than 6,100 reviews of Atlantis). The new resort got raves for its finishes, its cave-like, aquarium-adjacent pool area, its beach and its casino. Pans included references to Baha Mar's service, limited food and beverage options, high food prices and its sign-age, or lack thereof, not to mention the continuing construction.

One&Only Ocean Club also had a four-dot average rating on TripAdvisor as of last month, while the Melia held a 3.5-dot rating.

As for pricing, One&Only's rates are easily the highest. For late-August weekends, One&Only last month was offering rooms ranging from $779 to almost $3,200 a night for a two-bedroom, beachfront suite. Atlantis' nightly rates ranged from $152 for its lowest-priced Beach Tower rooms up to $404 at its all-suite Cove building.

Melia Nassau Beach, which is all-inclusive (its Black Angus steakhouse is the only one of its 11 food and beverage offerings that's a la carte) ranged from $284 to $1,532 a night for the Presidential Suite.

And Baha Mar's Grand Hyatt pricing ranged from $192 to $347 a night (the SLS wasn't yet bookable as of last month).

As for the upcoming peak season, Baha Mar, whose Grand Hyatt will eventually have 1,800 rooms, will add a 300-room hotel under SBE's SLS lifestyle-hotel brand as well as three more food and beverage outlets, including SLS mainstays Katsuya and Cleo, by this fall, and it plans to launch its first marketing campaign in December.

A guestroom at the Grand Hyatt at Baha Mar, the first property to open at the resort.

By next spring, the resort will include a 300-room Rosewood luxury hotel (CTFE owns Rosewood) and as many as 40 food and beverage outlets. Baha Mar has also announced plans to develop the 15-acre Long Cay private island just offshore for Baha Mar day visits, family activities, organic farming and marine-biology programming.

Baha Mar is also eying a demolition and redevelopment of the now-empty Crystal Palace hotel-casino beachfront site just west of the resort, though no timetable has been set for either the Crystal Palace or Long Cay efforts.

In the Hot Seat: Atlantis Paradise Island's Howard Karawan

Hotels editor Danny King spoke with the hotel's president about renovations and whether Baha Mar has affected business. Read More

In addition to the work at Marina Village, Atlantis next month will begin making improvements to its entry-level Beach Tower, while Atlantis' Blu Pool will be renovated and reopened by November. Next year, the resort is also planning upgrades for its Royal Towers, which are geared more toward the couples/social crowd that Baha Mar's SLS is also likely to target.

While Baha Mar and Atlantis will likely to continue to try to differentiate themselves in advance of the peak season, CBRE Hotels' Smith said that the growth in demand for both resorts will largely be tied to improved airlift to New Providence's Lynden Pindling Airport.

Although the airport offers direct routes to cities such as Atlanta, Chicago, Dallas, Houston, New York and Washington, there is no direct service from Boston, Los Angeles or San Francisco.

With that in mind, Davis said Baha Mar is in talks with carriers to increase airlift to feeder markets such as New York, Atlanta, Orlando and Fort Lauderdale, while Karawan listed Chicago, Houston and Dallas as markets where Bahamas officials are looking to expand on existing routes.

Karawan added that Los Angeles is also one of Atlantis' biggest feeder markets and could be key to broadening the island's appeal to Asian travelers.

"If we got direct service out of those markets, that opens up a huge market," he said.